Asciano move may delay QR sale

The Bligh government’s $3 billion float of Queensland Rail’s coal and freight assets was dealt a blow late on Tuesday after rival
Asciano Group
applied to have pricing and access to the network put under federal control.

Asciano’s bid to have QR’s coal tracks brought under the control of the National Competition Council could delay and complicate this year’s planned public float.

If Asciano succeeds in having the asset “declared", the existing regulatory regime would become irrelevant and the Australian Competition and Consumer Commission would decide disputes between Asciano and QR.

The challenge by Asciano – whose Pacific National is the only major rival in the state’s lucrative coal freight market, with a 15 per cent share – is another obstacle to the controversial partial privatisation of QR.

Asciano and coal companies oppose the Bligh government’s vertically integrated model for the QR sale, which means they will have to deal with a private company that has a monopoly over the tracks and the trains.

They also complain that a privatised QR would not make significant investments in the state’s crucial coal export chain.

A consortium of 13 coal companies is planning to lodge its bid for QR’s coal tracks in the next month as an alternative to the float.

The Bligh government has vowed to proceed with the float, which would be the biggest deal of the year, but Asciano’s move to have QR’s coal tracks “declared" could cast a cloud over the offering. If a legal challenge ensues, it could delay the float until early next year – one of the worst-case scenarios for the Bligh government.

Related Quotes

Company Profile

It is understood Asciano has been negotiating with the Bligh government to ensure QR National did not discriminate against other above-rail operators, but had become frustrated with talks, leading to the application to the National Competition Council.

The move will be seen by many as an attempted spoiler, and while it is unlikely to stop the float, it could affect the share price because there is no regulated pricing structure under the federal system, unlike the state regime controlled by the Queensland Competition Authority.

QR’s potential value in a public float was expected to be based on the regulated rate of return through pricing in the current draft access undertaking by the state authority.

Asciano has criticised the state regime, saying it was ineffective and could get even worse once QR was privatised. “Applying for declaration is a last resort for Asciano," Asciano chief executive
Mark Rowsthorn
said last month.

“If we cannot get the regulatory protections we need we will be better off with access to the tracks being declared."

He said regulatory obligations in the state regime were “weak and open to exploitation" by the track owner.

The government is waiting for a state determination on access which will allow it to lock in QR’s revenue streams ahead of the float.